Earnings Season: Caterpillar Inc. (NYSE:CAT)
It is earnings season once again and in honor of this highly anticipated event we will be profiling one stock each day that investors will we watching once the quarterly earnings results are released. With the highs we’ve reached to date, market reaction to these earnings results will be imperative to determine whether the uptrend will continue or if a correction is set to occur. Please join us over the next few weeks while we give you the information you need before the companies report.
The Stock
Caterpillar Inc. (NYSE:CAT) reported earnings this morning that were better than expected. The company reported results of 50 cents per share beat expectations of 39 cents per share. The company also offered favorable guidance for the current fiscal year that was 10% to 25% greater than anticipated. According the Reuters, “the company cited that improved guidance is [a result of] robust growth in Asia/Pacific and Latin America and continued improvement in mining and energy globally.” The stock has rallied to gains of over 4% on the day.
Caterpillar fulfilled both of the criteria to push the stock price beyond already high levels, which is to have expectations exceeded and favorable guidance provided. The stock has seen the same uptrend since February that has favorably impacted stocks in the markets since this low. The price of this equity has already significantly surpassed analysts targets of $67. However, taking into account the strength and the support that investors are giving this stock as a result of the economic recovery, fundamental targets of $75 seem reasonable. Fundamental ratios appear solid and the company pays a 2.33% dividend that should cover the transaction costs should you choose to play this equity.
The stock has a good history of performing following Q1 results. Gains over the past four periods following these results have averaged gains of around 8% in the 30 days following. All four of these periods presented a “beat” to the street. But the main story is not Q1 results, but the fact that investors are placing their money in equities that best exploit the economic recovery, which this stock does well, being a keystone for industry and manufacturing in the economy. Strong institutional accumulation is apparent.
Previous resistance for this company was at $70, which this stock has cracked today. Next point of resistance comes at $75.
Chart Courtesy of StockCharts.com
The Clock
Seasonally the stock tops out between mid-May and June, providing indication that the stock may settle from its gains as of recent and level off over the summer months. The stock follows the seasonality of the broad market which finds gains from October to May. The stock provides returns of 22%, on average, over this period.
| Caterpillar Inc. (CAT) 68.78 | + 1.27 (1.88%) | |||||||||||||||||||||
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| Seasonality Analysis | ||||||||||||||||||||||
| Analysis has revealed that with a buy date of October 25 and a sell date of August 12, investors have benefited from a total return of 679.39% over the last 10 years. This scenario has shown positive results in 7 of those periods. | ||||||||||||||||||||||
| Conversely, the best return over the maximum number of positive periods reveals a buy date of February 22 and a sell date of May 8, producing a total return over the same 10-year range of 231.93% with positive results in 10 of those periods. | ||||||||||||||||||||||
| The buy and hold return for the past 10 years was 214.25%. | ||||||||||||||||||||||
| Technical Analysis | ||||||||||||||||||||||
| Support 2 | Support 1 | Pivot Point | Resistance1 | Resistance2 | The Numbers | |||||||||||||||||
| 66.28 | 67.53 | 68.24 | 69.49 | 70.20 | Most Recent Close: | 68.78 | ||||||||||||||||
| Support/Resistance Analys | Broke Upr Resistance (2) | 52-Week High: | 68.95 | |||||||||||||||||||
| MACD Analysis: | Positive/Increasing | 52-Week Low: | 29.31 | |||||||||||||||||||
| MACD vs. Signal: | Above/Widening | Fib. Retracement: | ~ 100% | |||||||||||||||||||
| RSI Analysis: | Increasingly Overbought | 50-Day MA: | 61.16 | |||||||||||||||||||
| Stochastic (Fast) Analysis: | Increasingly Overbought | 200-Day MA: | 53.88 | |||||||||||||||||||
| 50 vs 200-Day MA Analysis: | 50-day Above 200-Day MA | High Critical Level: | 67.44 | |||||||||||||||||||
| Year over Year Trend: | Strongly Gaining | Low Critical Value: | 59.79 | |||||||||||||||||||
| Critical Level Analysis: | Broke Above Previous Tren | Average Monthly Gain: | 9.4% | |||||||||||||||||||
| MFI Analysis | Above 50 Advancing | Technical Rating: | 8 | |||||||||||||||||||
| Candlestick Analysis | Bullish | On a scale of 1 to 10, the higher the rating, the more appealing the investment is to buy at current levels. | ||||||||||||||||||||
| Situational Analysis | ||||||||||||||||||||||
| Past Year | Advancing Sessions % | Return % | 10-Year Average | Advancing Sessions % | Return % | |||||||||||||||||
| Apr 25 thru May 25 | 40 | 2 | Apr 25 thru May 25 | 47.8 | -0.2 | |||||||||||||||||
| Best Return: 18.9% – Sell May 6 | Best Return: 5.9% – Sell May 13 | |||||||||||||||||||||
| Apr 25 thru Jul 24 | 50.8 | 26.5 | Apr 25 thru Jul 24 | 49.9 | 2.6 | |||||||||||||||||
| Best Return: 26.5% – Sell Jul 24 | Best Return: 12% – Sell Jun 11 | |||||||||||||||||||||
| Apr 25 thru Oct 22 | 54 | 78.1 | Apr 25 thru Oct 22 | 49.2 | -0.1 | |||||||||||||||||
| Best Return: 79.5% – Sell Oct 20 | Best Return: 21.2% – Sell Jul 4 | |||||||||||||||||||||
| Following Q1 Earnings Releases – Last 4 Periods | During Equivalent Periods of Economic Recovery where Unemployment has Peaked | |||||||||||||||||||||
| 4-Period Average | Advancing Sessions % | Return % | 2-Period Average | Advancing Sessions % | Return % | |||||||||||||||||
| After 30 Days | 51.3 | 8.1 | After 90 Days | 52 | 12.2 | |||||||||||||||||
| Best Return: 13.8% – After 14 Days on Average | Best Return: 13.8% – After 67 Days on Average | |||||||||||||||||||||
| After 60 Days | 52.6 | 6.4 | After 180 Days | 49.8 | 13.6 | |||||||||||||||||
| Best Return: 15.8% – After 23 Days on Average | Best Return: 21.6% – After 152 Days on Average | |||||||||||||||||||||
| After 90 Days | 51.4 | 4.3 | After 360 Days | 50.5 | 38.3 | |||||||||||||||||
| Best Return: 17.5% – After 30 Days on Average | Best Return: 46.1% – After 251 Days on Average | |||||||||||||||||||||
| Further Analysis | ||||||||||||||||||||||
| Sector: | Industrial Goods | Industry: | Farm & Construction Machinery | |||||||||||||||||||
| According to Thackray’s 2010 Investors Guide, the seasonality for the Industrials Sector is limited to Market Perform, implying that a period of strength that would garner results greater than the correlating benchmark is non-existent. The sector is a virtual barometer of real GDP growth in the U.S. The sector moves higher when expectations for economic growth are positive and moves lower when expectations are negative. | ||||||||||||||||||||||
| Current Consensus Recommend: | Outperform | |||||||||||||||||||||
| Recommendation 1-Month Ago: | Outperform | |||||||||||||||||||||
| Recommendation 3-Months Ago: | Outperform | |||||||||||||||||||||
| Disclaimer | ||||||||||||||||||||||
| Analysis, comments, calculations, and opinions offered in this report, available via EquityClock.com, are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed. | ||||||||||||||||||||||
| © 2010 EquityClock.com, member of the Tech Talk Financial Network | ||||||||||||||||||||||
Stocks mentioned in this post: CAT
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